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Dollar falls ahead of busy week for labour data, dairy, RBA

Kiwi fell to 75.25 US cents at 5pm in Wellington.

Jonathan Underhill
Mon, 04 May 2015

The New Zealand dollar fell at the start of what may be a bumpy week for currency markets, with the Reserve Bank of Australia set to cut rates, the latest dairy auction and labour data from Australia, New Zealand and the US.

The kiwi fell to 75.25 US cents at 5pm in Wellington, from 75.34 cents at the New York close and 75.85 cents at 5pm in Wellington on Friday. The trade-weighted index slipped to 78 from 78.34 on Friday.

Traders are currently pricing in a 73 percent chance that the RBA will cut its cash rate a quarter point to 2 percent after its meeting tomorrow, while the GlobalDairyTrade auction results due out Wednesday morning are expected to show continued weakness.

First-quarter labour data in New Zealand is expected to show the jobless rate fell to 5.5 percent from 5.7 percent, while growth in labour costs slowed to 0.4 percent in the first quarter, based on a Reuters survey, while Australia's unemployment rate may have risen to 6.2 percent in April, while the economy added just 5,000 jobs. The week rounds out with US non-farm payrolls, with economists expecting the US economy added 225,000 jobs in April, bouncing back from a meagre 126,000 in March.

"It is a rocky road this week," said Imre Speizer, strategist at Westpac Banking Corp.

He expects a quarter-point cut from the RBA tomorrow and the door left open for further cuts "to maintain downward pressure on the Aussie." After the Reserve Bank of New Zealand's shift to an easing bias "our monetary policy is not looking too different from Australia's," he said.

The dairy auction is likely to be another fall in prices, he said, and there was risk that New Zealand wages data would show little inflationary pressure, one of the pre-conditions for the RBNZ to cut the official cash rate from 3.5 percent. There was also a downside risk with the expected bounce back in US non-farm payrolls, he said.

The kiwi may trade between 73.80 US cents and 77 cents this week, according to a BusinessDesk survey of 10 currency advisers. Nine expect the kiwi to fall, one says it will remain largely unchanged and none expect it to increase. The local currency has dropped 2 percent since New Zealand's Reserve Bank took interest rate hikes off the table at its review last Thursday.

The local dollar didn't move much after the final Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics printed at 48.9 for April, below the median estimate of 49.4 in a Bloomberg News survey.

The New Zealand dollar rose to 96.18 Australian cents from 96.11 cents on Friday. The local currency gained to 49.67 British pence from 49.41 pence on Friday ahead of elections in the UK on Thursday.

The kiwi weakened to 67.24 euro cents from 67.66 cents on Friday and dropped to 90.40 yen from 90.74 yen.


Jonathan Underhill
Mon, 04 May 2015
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Dollar falls ahead of busy week for labour data, dairy, RBA